Key takeaways
Welcome to our latest quarterly bulletin which contains updates on commercial litigation developments over the past three months, largely by reference to articles posted to our Litigation Notes blog in that period. Other posts are available on the blog, which you can visit any time. Or subscribe to be notified of the latest updates: https://www.herbertsmithfreehills.com/notes/litigation.
Harrington v. Purdue Pharma L.P., 144 S. Ct. 2017 (June 27, 2024)
In the early 2000s, the conversation around the standards for a good faith filing in bankruptcy was intense, particularly leading up to the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). Concerns were widespread that bankruptcy provisions were vulnerable to abuse, prompting a national debate on what could constitute a bad-faith filing. Nearly 20 years later, the landscape has evolved significantly. The financial crisis of 2008 brought unprecedented mortgage foreclosures and forced a larger segment of the population to consider bankruptcy.
I. Introduction
When a company is in financial distress, directors face difficult choices. Should they trade on to try to “trade out” of the company’s financial difficulties or should they file for insolvency? If they act too soon, will creditors complain that they should have done more to save the business? A recent English High Court case raises the prospect of directors potentially being held to account for decisions that “merely postpone the inevitable.”
The bankruptcy of the Mt. Gox cryptocurrency exchange in 2014 was a pivotal moment in cryptocurrency history. It demonstrated the vulnerabilities of early cryptocurrencies and saw the worst fears of the industry become a reality. However, in the years since it has also provided an excellent example of the successful tracing and recovery of a variety of asset classes. Creditors have recently received the first distributions from the recovered assets of Mt Gox, in stark contrast to the initial claims that access to the assets had been lost forever.
Background
In an opinion issued on Sept. 20 by the United States Bankruptcy Court for the District of New Mexico, Judge David T. Thuma held that the Rooker-Feldman doctrine does not prevent a bankruptcy court from determining whether the automatic stay applies to pending state court litigation. See In re Shook, Case No. 24-10724-t7 (Bankr. N.M. Sept. 20, 2024) [ECF No. 54].
If a building contractor becomes insolvent, but the build is covered by an NHBC Buildmark warranty providing insolvency cover, when does time start to run for the insured to start proceedings against an insurer who fails to pay a claim?
The Technology and Construction Court (TCC) has recently considered this question in the context of an application for summary judgment made by the NHBC, in Peabody Trust v National House-Building Council [2024].
On September 12, 2024, the United States Court of Appeals for the Eighth Circuit reversed a trial court decision that had rejected a bank’s assertion of the in pari delicto defense to aiding and abetting claims brought by the bankruptcy trustee for a debtor that had allegedly perpetrated a Ponzi scheme. Kelley v. BMO Harris Bank Nat’l Ass’n, 2024 WL 4158179 (8th Cir. Sept. 12, 2024).